“Don’t escalate chip restrictions on China”

U.S. chip company executives met with senior Biden administration officials on Monday to discuss China policy, the State Department and sources said, while the most powerful semiconductor lobby urged a halt to consideration of more restrictions.

U.S. Secretary of State Antony Blinken discussed industry and supply chains with chip company CEOs after a recent visit to China, a department spokesman told reporters.

Administration officials including Commerce Secretary Gina Raimondo, National Economic Council Director Lael Brainard and National Security Council Director Jake Sullivan met, according to people familiar with the meeting Intel, Qualcomm and Nvidia. meeting told Reuters.

The chip industry is eager to protect its profits in China as the Biden administration considers a new round of restrictions on Chinese chip exports. According to the Semiconductor Industry Association (SIA), China's semiconductor purchases last year were US$180 billion, accounting for more than one-third of the global total of US$555.9 billion and making it the largest single market.

Blinken sought to "share his views on industry and supply chain issues, especially after his recent trip to China" and "hear directly how these companies view supply chain issues and how they view doing business in China." U.S. State Department spokesman Matthew Miller said at a press conference.

Discussions with administration officials also include accelerating disbursement of government funds set aside for semiconductor companies in the CHIP Act and ensuring that U.S. policy does not exclude chip companies from the lucrative Chinese market, another person familiar with the matter said.

The Commerce Department's Raimondo is overseeing the $39 billion CHIPS Act semiconductor manufacturing subsidy program approved by Congress last year. The bill also provides a 25% investment tax credit for building chip factories, worth an estimated $24 billion.

The U.S. government is also concerned about China's access to state-of-the-art artificial intelligence chips, the sources added, adding that Washington appeared to be on the verge of tightening rules on the computing speed of such chips but had not yet set a specific threshold.

Earlier on Monday, the U.S.-based SIA called on the Biden administration to "refrain from further restrictions" on chip sales to China and urged the government to allow "the industry's continued access to China, the world's largest commercial market" for commodity semiconductors. "

SIA said: “We recognize that a strong economy and national security require a strong U.S. semiconductor industry, and leaders in Washington took bold and historic action last year to enact the CHIP and Science Act to enhance our industry’s global competitiveness and Reduce supply chain risks. SIA also emphasized that allowing the industry continued access to the Chinese market, the world's largest commercial market for commodity semiconductors, is important to avoid undermining the positive impact of this effort. SIA also pointed out that the United States has repeatedly adopted overly broad, ambiguous, and sometimes unilateral restrictive measures, which may weaken the competitiveness of the U.S. semiconductor industry, disrupt the supply chain, cause significant market uncertainty, and trigger China's continued escalation of corresponding actions. .

"We call on both governments to de-escalate tensions and seek solutions through dialogue rather than further escalation. We urge the governments not to impose further restrictions until there has been wider engagement with industry and experts to assess the impact of current and potential restrictions to Determine whether the restrictions are narrow, clearly defined, applied consistently and fully coordinated with allies," the SIA continued.

The Biden administration is considering updating a sweeping set of rules implemented in October to hobble China's chip industry and enacting a new executive order that would restrict some overseas investment, Reuters reported.

A spokesman for the White House National Security Council said: "Our actions are carefully designed to focus on technologies with national security implications and are designed to ensure that U.S. and allied technologies are not used to undermine our national security."

The initial sources, who spoke on condition of anonymity, said not all officials would meet with every company.

The Commerce Department and the White House declined to comment on any potential discussions.

The meetings come after China recently moved to restrict exports of raw materials such as gallium and germanium used to make chips, an issue a department spokesman said Blinken discussed during CEO talks.

Nvidia, Qualcomm and Intel depend on China for significant sales. Qualcomm is the only company licensed by U.S. regulators to sell mobile phone chips to Huawei Technologies Co.

Nvidia is selling an artificial intelligence chip tuned for the Chinese market that has already gained traction among major Chinese companies, with Intel CEO Pat Gelsinger traveling to China last week to announce the launch of his own artificial intelligence in the country chip.

A U.S. chip industry trade group said on Monday that the Biden administration's potential restrictions on sales of advanced semiconductors to China could undermine the government's huge new investment in domestic chip manufacturing, the Wall Street Journal reported.

The Biden administration is considering a series of new restrictions on chip sales to China. At the same time, after the passage of the Chip Act last year, the government will allocate US$39 billion to build new US chip manufacturing plants.

"Allowing the industry continued access to China, the world's largest commercial market for commodity semiconductors, is important to avoid undermining the positive impact of this effort," the Semiconductor Industry Association, an industry body in Washington, D.C., said in a statement.

U.S. chip companies have also long argued that the government should carefully weigh the impact of export restrictions because sales in China support investment in the U.S. and help fund research that maintains their technological edge.

Nvidia Chip companies including artificial intelligence chip leader Nvidia have been lobbying the government against stricter export controls after tensions between China and the U.S. centered on the semiconductor and electric vehicle industries intensified. Nvidia's chief financial officer warned that If the sale of artificial intelligence chips is banned, "U.S. industry will forever lose its opportunity in China."

The SIA said the restrictions were overbroad, vague and sometimes unilateral and "have the potential to undermine the competitiveness of the U.S. semiconductor industry, disrupt supply chains, create significant market uncertainty and prompt China to take escalating retaliatory actions." ” It called on the Biden administration to consult with industry before imposing more restrictions.

In October, the United States imposed some of its toughest restrictions yet on chips and chip-making equipment, requiring chip companies to seek permission from the Commerce Department to sell some of their most advanced products to Chinese customers. These measures are designed to prevent U.S. technology from increasing China's power.

A spokesman for the White House National Security Council said: "Our actions are carefully designed to focus on technologies with national security implications and are designed to ensure that U.S. and allied technologies are not used to undermine our national security."

The spokesperson added that since the passage of the CHIP Act last year, "private companies have announced investments of nearly $140 billion in U.S. semiconductor production, supply chain and research and development over the next decade."

Following the U.S. action, China banned major Chinese companies from buying products from U.S. computer memory company Micron and recently imposed restrictions on exports of metals used in mobile phone communications chips.

The Biden administration is now considering further restrictions on artificial intelligence chips developed by Nvidia for the Chinese market. It is also considering cutting off China's access to artificial intelligence chips through cloud computing companies. President Biden is expected to limit U.S. investment in China's advanced chip manufacturing and other technologies in an upcoming executive order.

After the passage of the Chip Act last year, many chip companies are planning to launch large-scale chip manufacturing projects in the United States. They include Intel, Micron, Samsung and TSMC, which are collectively investing tens of billions of dollars in new factories that policymakers hope will help reverse the industry's shift to Asia in recent decades.

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